An economist explains how Amazon could use its lobbying for a $15 minimum wage as a 'weapon' against other retailers

JOE KLAMAR/AFP/Getty ImagesJeff Bezos, CEO of Amazon
  • Amazon will raise its pay to $US15 an hour for all US employees effective November 1.
  • “We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” CEOJeff Bezos said in a statement. “We’re excited about this change and encourage our competitors and other large employers to join us.”
  • He is also directing Amazon’s lobbying team to start advocating for a federal increase in the minimum wage to $US15 an hour.
  • Amazon might be hoping to use a higher federal standard as a “weapon” to hurt its competitors, according to economist Michael Farren.

In raising its standard wage to $US15 an hour, Amazon has turned an enemy – Sen. Bernie Sanders – into a friend and gained what could be a powerful new weapon.

Amazon’s statements about the raises indicate that it wants to position the move as a moral one.

“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” CEO Jeff Bezos said in a statement. “We’re excited about this change and encourage our competitors and other large employers to join us.”

The new wage standard will be effective November 1.

At the same time, Amazon is trying to force other retailers to follow by directing the company’s lobbying team to start advocating for a federal increase in the minimum wage to the same $US15 an hour it will now pay workers.

“We will be working to gain Congressional support for an increase in the federal minimum wage. The current rate of $US7.25 was set nearly a decade ago,” Jay Carney, Amazon’s head of global corporate affairs, said in a prepared statement. “We intend to advocate for a minimum wage increase that will have a profound impact on the lives of tens of millions of people and families across this country.”

Amazon is also positioning this lobbying effort as moral, but that may not be the only reason the e-commerce giant would be incentivized to do it. A nationwide minimum wage of $US15 an hour would require all of the company’s retail competitors to pay their store workers at least that amount.

In that way, Amazon could be “weaponizing” policy, according to economist Michael Farren of the right-leaning think tank The Mercatus Center, which is generally against government regulation.

“When Amazon tries to force others through lobbying efforts to compete in the way that they have a competitive advantage, that’s the point where you have taken … a policy or a regulation that is theoretically in the public interest and you’ve weaponised it to turn it into a private interest,” Farren said to Business Insider.

Workers in stores already tend to make less than workers in distribution warehouses on average. It was theoretically a smaller cost for Amazon to bump its workers up to $US15 than it would be for Walmart to bump all of its store employees up to $US15.

Large store chains like Walmart and Target are already raising wages on their own, but not to the $US15 target that Amazon is proposing. The competition for low-wage workers has become more fierce in recent years as the US labour market has grown more competitive, sparking a “war for talent.”

Plus, a new federal minimum wage would force Walmart to direct resources away from developing new innovations to compete against Amazon, Farren argued.

In addition, Amazon’s technological forays into automation are further along than competitors, he said. A higher minimum wage might not even affect Amazon that much in the long run.

“Amazon’s business model is premised on constant innovation,” Farren said. “That’s one of the reasons why they’re so scary to other industries. The more that they automate their production process, the less that a higher federal minimum wage would hurt Amazon.”

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